We all want to stop working someday right? I thought so, I know I do. The thought of being free from a 9 to 5, free from an alarm clock and free from any daily responsibility is very exciting. But first we have to get there. You know the saying “Work hard now to enjoy your money later” well that person – whoever they may be – is talking about retirement.
As a financial planner you’d think that my bank account is stacked with Benjamin’s and I’ll retire when I’m 40. Well I’m 34 years old and I can tell you that my retirement is at least another 25 years away. How do I know that? From my retirement plan of course.
You don’t need to be a finance wizard to set retirement goals and start saving, all you need to do is ask yourself a few key questions. From there you can start setting money aside in a retirement fund. I promise, saving for retirement really can be as easy as 1,2,3…4,5.
When do you want to retire?
Please don’t say tomorrow. This has to be a realistic date. Keep in mind the earlier the date, the more aggressive your savings will need to be. I would like to retire between the ages of 59 and 61, so that’s how I’ve allocated my savings. I’m sure I could retire sooner if I saved more, but I really like to travel.
How much can you save?
How long you have until retirement determines how much you’ll need to save on a monthly basis. When I say save I mean smartly invest in a low fee mutual fund. I’m a huge fan of investing in mutual funds because you can choose an appropriate level of risk and you have access to several different investment options – but that’s just me.
Maximize your plans…all of them
Setting some of your own money aside is a great way to save for retirement, but having someone else save for you is even better. Check what types of savings plans your employer offers. Sometimes they offer discounts on fees or make matching contributions into your plan.
Taking advantage of employer savings plans (both registered and non-registered) is a great way to grow your savings quickly.
Keep it going
Don’t push yourself too hard when it comes to savings. A lot of times I see people who save too aggressively and don’t leave themselves enough money to live. Then they end up withdrawing from their savings and that’s a vicious circle.
The easiest way to save consistently is to set your retirement date, set your realistic budget and set up automatic payments. Having money transfer directly from your checking account to your savings account is the best way to save because you never see it and therefore you won’t miss it.
Of course, the more you contribute the faster you’ll reach your goal which means you’ll either retire earlier than planned or retire with more money than you thought. Both of those things are nice, but not if it restricts your current lifestyle.
Tahnya Kristina is a personal finance blogger and Certified Financial Planner. She enjoys helping people land their dream job, achieve financial success and find personal happiness. Say hi anytime www.twitter.com/tahnyakristina
